Walgreens Is Poised for a Healthy Rally

Shares of Walgreens Boots Alliance (WBA) are setting up for an upside breakout.  The narrow sideways action that has been in place since early June may be finally ready to give way. There is still work to be done but patient WBA investors should take on a more positive view of the stock in the near term.

Back on Oct. 20 WBA closed with a 5% gain on its second heaviest upside trade of the year. This powerful news-inspired rally is the stock's biggest single day gain of 2016 and was a very sharp reversal from the previous session's drop. 

Walgreens is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells WAG? Learn more now.

The day before earnings WBA fell below a key support zone that held the August lows.  Shares were on the verge of a breakdown on Oct. 19.  Now, nearly two weeks later, WBA has recovered nicely and is trading just shy of the October peak.

The rebound off the October lows has left behind a very solid nearby support zone.  This has created a very low-risk entry opportunity for patient bulls. WBA should be considered a buy between $82.50 and $81. The lower band of this key zone is marked by a moving average cluster that includes the 50- and 200-day moving averages. 

Since mid July the stock has straddled both sides of its 200-day but has been unable to break free. A move past $83.40 will clear last month's high. A clear takeout of this level could finally provide the spark to lift WBA out of its six-month range. 

On the downside, a close below $79 would violate last week's low, indicating WBA's sideways pattern will continue.

Click here to see the below chart in a new window.

Long WBA

More from Investing

Markets Look Confused After Latest Beating

Markets Look Confused After Latest Beating

Jim Cramer's Investing Rule #2: It's OK to Pay Taxes

Jim Cramer's Investing Rule #2: It's OK to Pay Taxes

General Electric Expulsion From Dow Symbolizes Unsettled Week in Markets

General Electric Expulsion From Dow Symbolizes Unsettled Week in Markets

3 Best Investing Opportunities Right Now in Closed-End Funds

3 Best Investing Opportunities Right Now in Closed-End Funds

How Small-Cap Stocks Can Protect Your Portfolio From a Trade War

How Small-Cap Stocks Can Protect Your Portfolio From a Trade War